Repossessions at highest rate in 12 years

More people are struggling to stop their homes being repossessed than at any point in the past 12 years, official figures show.

The impact of higher interest rates, rising utility bills, more expensive petrol and large credit-card bills has made it harder for thousands of people to afford their monthly mortgage repayments. The number of people facing the loss of their home rose sharply in the third quarter, with homeowners in Birmingham being more at risk than any other city in England and Wales.

Banks and building societies started proceedings to repossess 29,991 homes between July and September, 55 per cent more than during the same period last year, the Department for Constitutional Affairs (DCA) said yesterday. The last time so many homeowners were threatened with losing the roof over their heads was in the third quarter of 1993, when many people were still battling with negative equity after a dramatic slump in house prices.

After Greater London, the West Midlands was the most vulnerable county, followed by Greater Manchester and West Yorkshire. Although by historical standards the number of homes at risk is low, City analysts said the figures depicted the start of a worrying trend. Unlike in the early Nineties, when the number of lenders seeking permission to repossess homes peaked at 186,649 in 1991, interest rates are still relatively low.

John Butler, a UK economist at HSBC, said: "The rate of change is concerning given it has happened in a background in which households have been confronted with little bad news. That, perhaps, shows a greater sensitivity of households to smaller shocks than has been the case in the past."

The one solace for homeowners forced to face up to the threat of eviction is that not all court summons result in repossession orders. The DCA figures showed that the English and Welsh county courts issued 19,687 repossession orders, 66 per cent more than during the same period during the previous year. This was the highest figure for nine and a half years.

Even then, homeowners still have time to come to some sort of arrangement with their lender. Banks and building societies sometimes use the court threat to wrest the repayment process back on track. In the first half of 2005, lenders entered 54,344 actions for repossession with the county courts but only 4,640 homes were repossessed, according to the Council of Mortgage Lenders (CML), an industry body.

A spokeswoman for the CML said: "The big percentage increase looks quite scary and should send a warning shot but equally people should not fall into the trap of thinking this is a drastic scenario. We are talking about marginal households, where anything that tips the balance, like loss of income or an increase in mortgage payments, may cause a problem."

"The increase in the number of house repossessions rests squarely on the huge increases in consumer debt which we have seen over the last few years," Robert Pick, a personal insolvency specialist at the accountants Grant Thornton, said.

The CML predicted that around 10,000 homes would be repossessed this year, compared to the peak of 75,000 in 1991. Around 11.5 million households in the UK have a mortgage, or 70 per cent of the total number. The Bank of England has increased interest rates to 4.5 per cent from a low of 3.5 per cent in 2003.